Home prices up, but too soon to declare a recovery

A key gauge of U.S. home prices shows that the market came back to life in April for the first time in seven months, but analysts said it’s too soon to conclude that the sector’s troubles are over.

Home prices rose in 19 of the 20 cities surveyed by Standard & Poor’s/Case-Shiller. The biggest gains from March to April were in San Francisco and Washington, while the only city that showed negative growth was Detroit.

David Blitzer, managing director and chairman of the index committee at Standard & Poor’s, said that while one month doesn’t make a trend — especially in the spring, traditionally a popular time for home sales — it was significant that some of the hardest-hit areas such as Phoenix, Las Vegas and Miami seemed to be recovering.

“When the worst ones begin to turn around, that’s a good sign,” Blitzer said in an interview.

Both the Standard & Poor’s/Case-Shiller 10-city and 20-city measures were up 1.3 percent from the prior month.

Home prices show some improvement. (The Washington Post/Source: S&P/Case Shiller)

Ian Sheperdson, chief U.S. economist for High Frequency Economics, called the jump “startling.” Paul Diggle, an economist with Capital Economics, said it’s clear “the momentum is now upwards.” Analysts had expected only a slight increase of 0.3 percent.

But other economists focused on the fact that most cities had negative growth compared to last year. Home prices fell by 2.2 percent for the 10-city composite and 1.9 percent for the 20-city composite. Both indexes are down a whopping 34 percent from their peaks in the summer of 2006. Barclay’s Michael Gapen also pointed out that “a broad regional variation remains” in price gains.

Tuesday’s report follows other mixed but hopeful messages about the national housing market in recent months. Analysts have been reluctant to call it a positive trend, but say they are waiting and watching.

“Maybe two years from now we’ll look back at the first few months of 2012 and say it turned a corner,” Blitzer said.

Diggle said, “It’s unlikely that house prices can continue rising at this sort of pace for much longer. After all, the tight supply conditions that have led to sharp price gains are unlikely to persist now that banks appear to be processing foreclosures and short-sales at a quicker pace.”

In the Washington area, where the housing downturn has hit some counties more than others but has generally been less severe than in other parts of the nation, home prices rose by nearly 3 percent compared to March and by more than 1 percent compared to April 2011.

Record low mortgage rates and a shortage of inventory were two of the reasons, agents said.

“The D.C. market has been really busy since January 2009,” said Mac McCord, an agent with Re/Max Realty Services in Bethesda.

But the home-buying trend is more prevalent inside the Beltway than outside. And many of the properties that are currently selling well tend to be near public transport, said Ingrid Suisman, an agent at Long and Foster.

“The recovery of the housing market, like everything in real estate, depends on location,” said Bob Wulff, senior vice-president at B.F. Saul.

Amrita Jayakumar covers national startups, small business issues and entrepreneurship.